Archive for the ‘Adding value’ Category

It seems that many in-house Tax Directors do not use their auditors for tax work and advice.This is one of the conclusions from Winmark’s third benchmarking survey of in-house Tax Directors.

Out of over 100 respondents to the Tax Director Network survey, only one-third use their auditors for corporate tax planning, and only a quarter use their auditors for international tax planning or even tax disclosures in the accounts.

Many Tax Directors also made clear why they prefer to obtain advice from other Big 4 firms. Tax Directors cite conflict of interest, the need to obtain audit committee approval and the level of fees involved. Higher costs arise when the auditors have to obtain second opinions where they cannot audit their own firm’s advice and that advice could have been obtained at lower cost elsewhere.

Two-thirds of the Tax Directors who responded to the survey use external advisers other than their auditors for corporate tax planning. Even more use other Big 4 firms for VAT advice and over half use other Big 4 firms for international tax planning.

When I was in practice, all the talk was of ‘cross-selling’ additional services to audit clients. Clearly this no longer a worthwhile use of time and effort – at least as regards larger corporates.

Are FDs in medium-sized companies (ie: those without in-house tax directors) as reluctant to seek tax input from their auditors I wonder?  If that were the case then what is the future for firms outside the Big 4  who expect to cross- sell to their audit clients? Should the focus be on other services rather than tax advice?

There is an ever increasing need for auditors to be seen to be independent. This survey suggests that the number who are able and willing to audit the impact of advice provided by their tax colleagues will continue to fall.

Copies of the executive summary of the survey report are available on request from Winmark Research. The full report will only be available to members of the Tax Director Network and to others who completed the survey.

I used the expression ‘Halfway house’ firms of accountants for the first time today when commenting on an internet forum. It seems sensible to explain my thinking in a short blog post.

I had in mind those mid tier firms that are largely all but indistinguishable – in the eyes of prospective clients. It’s a harsh truth that is perhaps best evidenced  by the promotional flyer about which I have written in recent blog posts. I also made a similar point when reviewing an innovative online video produced by another mid-tier firm.

It’s partly the difficulty in distinguishing themselves that will be the downfall of many mid-sized (half way house) firms. They struggle to win enough competitive pitches, to attract new clients and new partners with a following and to retain qualified staff. They are constantly fighting to become more efficient so as to reduce costs and maintain, let alone, improve profit per partner.  The recession has reinforced all of these challenges.

The only mid tier firms that will survive and thrive are those with clearly defined niches. By this I mean they are known for having an area of expertise that makes them really stand out from the pack. They recruit staff and partners specifically to bolster this expertise and they don’t waste time and money trying to be all things to all people. And these firms will only survive as regards those specialist areas. The more generic areas of their practices will shrink as partners retire or leave to go to smaller firms with lower overheads and potentially higher profits per partner. The smaller firms will often be less pressurised environments too – especially if they stick to clearly defined, promoted and valued niches.

Those mid-tier firms that have no such recognised niche expertise will face increased pressure from the egg-timer squeeze of both the largest firms and of the smaller more focused and cost-effective firms. The larger ones are perceived as having more credibility for the provision of a wider range of services – when these are needed and valued. The smaller ones are able to provide compliance, advisory and special services more cost effectively.

How many businesses really need to be served by halfway house firms of accountants?

I received a 3 paragraph letter recently from someone I didn’t meet at a recent networking event. This person had obtained an attendee list and sent out what is clearly a standard letter. I won’t embarrass the firm or the writer by identifying them. And here’s the key thing: Nothing in the letter will identify them either.

As you read it I would encourage you to think about how ineffective such an identikit letter is likely to be. It could be describing almost any of the top 50 firms of accountants.

“It was unfortunate that I was not able to meet with you at the [event]. I would have appreciate the chance to talk with you about your organisation and gain an insight into how we can work together in the future.

I would like to introduce our firm to you. [This top 30 firm] is a firm of chartered accountants providing a fully integrated business advisory service across several areas of expertise, designed specifically to save you time, provide you with peace of mind and achieve cost savings where possible. We pride ourselves on our ability to understand our clients’ issues, working closely with them to identify areas where we can provide solutions that add value to their business and shareholders. In short, we are here to help you.

Our clients include quoted public limited companies, owner managed and family owned businesses of all sizes, professional partnerships, regulatory bodies, public sector bodies and not-for-profit organisations. I will contact you in a couple of days to discuss your requirements and how our approach to service delivery could be of benefit to you and your organisation. Further information about our firm is available on our website [here].

Direct mail has a poor reputation – partly because so many direct mail letters are poorly written. This one is focused solely on the firm of accountants and says nothing of any value. Nothing that distinguishes the firm in question from any other firm. Nothing that would make a recipient think “Oh, now that sounds different from my current accountant”. Nothing that would make anyone want to check out the firm’s website. And nothing to identify whether the sender has relevant expertise, is a partner, a specialist or is in the marketing department or whatever.  And don’t get me started on the lengthy sentences (one has almost 40 words in it).

Sorry. But this letter fails on almost every measure. Of course this direct mail campaign will have limited impact.

It also reveals the opportunities available to smaller firms to distinguish themselves. Most of the the bigger firms are all the same – or at least they come across as all the same. This letter, like so much of the marketing materials emanating from bigger firms, tries to be all things to all people. So it will be largely ineffective, a waste of time and of effort. Which takes us back to my last post on this blog…

Any comments?

There are essentially just five basic approaches to making more profits as an accountant in practice:

1. Increase your charges – for doing the same work you have always done. This requires you to increase the perceived value of what you do
2. Speed up collection of your fees and so reduce your capital requirements and interest costs
3. Reduce the time you spend providing your services whilst keeping your fees the same as before. This allows you to take on more (profitable) work.
4. Provide more value and charge more than you did before NB: this is not the same as simply ‘doing more work’ for existing clients
5. Provide additional services and charge for these. Avoid preconceptions about what clients will pay.

There are also 2 supplementary things you can do:

• Get existing (good) clients to introduce new prospects just like them

• Sack the duff D-list clients who get in the way

You will appreciate that my focus here is on generating more profits rather than on increasing your top line, for example through adding new clients secured through advertising, marketing and networking.

In my talks on this subject I tend to focus on the first 5 points above although I also cover the 2 supplementary issues and some of the less costly methods of securing new clients and turnover. In so doing I share dozens of practical, commercial and easy to implement ideas that I know are being applied by other smaller practitioners.

“How to make more profits from your smaller clients – without fancy tax schemes” will next be presented in Birmingham on the morning of Friday 21 May 2010. Full details here.

The Telegraph Business club has produced a very professional film about a London based firm of accountants: Lubbock Fine.

As I watched this I initially felt sorry for the firm. Everyone on film was very positive but we could have changed the name of the firm to one of dozens of others and almost every single statement and sentiment being expressed would still have held true. Especially the so-called ‘ground breaking’ reorganisation  that resulted in a partner-led one to one service and joined up client services some years ago.

About 3 minutes into the film we learned about some of the firm’s genuinely unique (or at least less common) features – including their expansion into the old eastern block and the fact that over 50% of their clients are based overseas. Also their long term corporate sponsorship and their involvement with other worthy activities.

I was especially taken by Managing Partner Geoff Goodyear’s closing statements (6 minutes in). He talked about the obligations he sees for management to, effectively anticipate changes within the market and the need to “develop some skill sets that may not be available or required at the moment but you anticipate that they will be required in the future”.  I would like to think though that this too is the same as all other decent managing partners.

The example inspired by the film prompts me to highlight a number of points that I have mentioned previously on this blog:

1. Good professionals need to develop a variety of skills. Effective CPD is about more than simply keeping uptodate technically (see yesterday’s post: What does CPD really mean?)
2. Sometimes you don’t need to be different,  you just need to communicate what you do more effectively than your competition (and Lubbock Fine’s film is a great example of a firm doing just that);
3. Some of the things we think make us different are fallacies. Many firms of a similar size and age find it hard to identify REAL points of difference. In practice though this is  probably only an issue in competitive tender situations when comparable firms find it hard to distinguish themselves;
4. Lubbock Fine’s website highlights their specialisms in 6 key client areas.  Such an approach is bound to be more effective than trying to be all things to all types of clients.

I titled this piece – “How different do you need to be?”  What’s your view?  How different do you need to be?

One accountant I know advertises his services using what I think is a pretty good message.

He suggests to recipients of his ad that if they do their own tax return it probably costs them far more than they realise. More in terms of the opportunity cost of their time, the hassle, worry and the prospect of making mistakes.

In other words he’s advocating the reasons to use a professional. And he’s right of course.

On the other hand I noticed the same accountant plans to run his own telemarketing campaign. He may have a good reason for doing this but it seems like a big risk to me.   It seems he’s going to use untrained staff to make calls, using a script/approach that hasn’t been checked by anyone who understands what works and what doesn’t work when it comes to telemarketing.

Perhaps he has had a bad experience with previous attempts using so-called professional telemarketers. Perhaps they did not have the requiste experience, perhaps the offering was wrong, perhaps the follow up was inadequate, perhaps the pre-meeting confirmation with prospects was lacking, perhaps the accountant needs to develop better ‘closing’ skills. There could be all manner of things to tweak or test.

I suspect that the outcome of a DIY approach to telemarketing will probably cost the accountant far more than they realise. More in terms of the opportunity cost of their time, the hassle, worry and the prospect of making mistakes.

Imagine if someone who has had a bad experience with an accountant decided that all accountants were rubbish and decided to attempt to save money and to complete their own tax returns in future…..

AccountingWeb recently ran a series of articles about accountants as business advisers. My contribution as Consultant Practice Editor approached the subject from an unusual angle.

There is already plenty of material that seeks to persuade accountants that they need to become better business advisers, and how they could do this.

My article was titled: Do accountants want to be business advisors?

I felt vindicated in my stance both by the comments added by readers and also by the number of times the article was ‘viewed’ – it was consistently running at about 3 times the number of people reading the related piece about ‘How to be a business adviser’.

Here’s an extract:

————

Although many accountants describe themselves as ‘accountants and business advisers’, I have a suspicion that general practice accountants typically fall into one of four camps when it comes to the provision of business advice to clients:

• It’s a no go area: The accountant’s business experience is limited and perhaps they don’t feel that confident with the idea of providing business advice.
• Personal experience: The accountant is willing and able to share their own experiences of business over the years, perhaps drawn in part from working with other clients.
• What others say: The accountant offers advice based on what they have read in books, magazines and websites and possibly what they recall from their studies and from attending seminars and conferences. However, their level of interest in developing this area of skill is much lower than their desire to keep up to date with technical knowledge.
• A systemised approach: The accountant has bought into a programme that assists them in adopting a structured approach to the provision of business advice and either they actively promote the service to their clients or they shy away from doing so and quit the programme.

If I were still in practice I’d like to think that I would probably move up the scale into the fourth category above. Others are happier lower down the scale, and that’s fine as long as their clients are not expecting anything more. Time and again I hear business owners complaining that their accountants fail to provide business and tax advice; they simply do the books, produce tax returns and tell the client how much tax to pay.

Only a relatively small number of accountants seem to be willing to experiment with the systemised approach, however there is plenty of pressure on the others to do this or to beef up their approach and provide business advice, as well as to learn how they can get paid for doing so.

———

Does this resonate with the readers of my blog?

Telemarketing companies who focus on securing new clients for accountancy businesses tell me that they have never been busier. And there do seem to be a number of such specialist firms – in addition to the more general telemarketing companies that simply work for accountants as and when engaged to do so.

Some telemarketers are more effective than others. But effective or otherwise they are all calling the same corporate clients – probably including some of yours.  They source targets from local trade lists, Companies House data, Commercial list brokers and anywhere else they can trace key information.

The telemarketers generally offer the people they call tax reviews, to reduce tax bills and to provide a more hands on service. The better ones will find out what the client isn’t currently getting from their accountant and then introduce someone who promises to provide such a service.

Now, to be fair, many accountants who use telemarketing companies complain that the target client was only interested in reducing the fees they pay for accountancy services. And, as such, the introduction secured by the telemarketer was a waste of time.  Leaving such situations aside, on other occasions it often isn’t hard for a newcomer to promise a client more than they are currently getting – more attention, more advice, more reasonable fees and so on.

The question then is: How loyal will your better clients be when they are approached? And it is ‘when’ rather than ‘if’.

Accountancy Age has published a profile piece on Peter Hargreaves (Chartered Accountant and founder of Hargreaves Lansdown).  In it he is quite scathing about certain elements of the profession. None more so than the smaller practitioner:

“They’re not doing a good enough job for clients, hence they can’t charge much for the work. A self-defeating spiral, where pressure on fees is rife from client and competitors.‘The problem is they can’t command the fees to do the job properly. The profession has failed singularly to create the right aura for the charging of fees. They’re different to lawyers, who tend to make good businessmen.”

“The problem is the mindset of accountants. They tend to be ‘mean’ with money, which makes them fear charging. ‘Because there are a few doing it for nearly nothing, the others feel they have to compete, but they’ll give you a bad service. A false economy.”

“Those who want accountants don’t know who’s good, and they try and pay very little.”

“Adding value is the key for practices, instead of just preparing accounts from a ‘bunch of invoices’, because ‘if that’s the service they’re offering they don’t service much for it – and if that’s what the client wants they don’t deserve a good accountant”.

“They should say to clients “we want to be in your offices every three months finding out what’s going on, where you make money, to help financially plan your business. If you make a big profit, should you do something before then, perhaps a marketing promotion and spend it this year while we’re profitable” etc. but of course lots of business don’t even know if they’ve made a profit until the accountants produce the accounts.”

Do you find that insulting or does any of what Peter says strike a chord? It’s pretty much the same sort of message as is offered (a little more gently perhaps) by organisations such as AVN, the 2020 group and Probiz. Please tell me what you think by way of comments on this blog.